Exit planning is a comprehensive road map to successfully exit a business. An exit plan asks and answers all the business, personal, legal, financial, tax and estate planning questions involved in selling a business.
Exit planning includes contingencies for illness, burnout, divorce, and even the owner’s death. Its purpose is to maximize the value of the business at the time of exit, minimize the amount of taxes paid, and ensure that the business owner can accomplish all his or her personal and financial goals during the process.
The scope of an Exit Planning project can vary widely from one project to the next, depending on the chosen exit strategy, the objectives of the business owner, and the readiness of the owner and the business for exiting.
Some activities are core to almost any exit planning project, including owner education, determining the best exit strategy, creating a formal exit plan, determining the value of the business, growing and preparing the company for sale or transfer, and finally selling to a third party or transferring the management and ownership to current internal owners.
For business with higher estimated business value, personal financial and estate planning can be important. Determining what the business owner will do after they exit may also be a critical activity. Contingency planning and pre-sale due diligence are also important to the process.
On last important factor in this process is having an effective and capable team of advisors with exit planning experience. This may come from a family office or an advisory board. Or it may need to be built from current professional advisors, supplemented as needed with advisors with specialty knowledge. Potentially a business owner may need to seek advice from accounting firms, business attorneys, exit planners, bankers, insurance professionals, financial and wealth managers, real estate brokers, valuation firms, and merger and acquisition professionals. Advice from marketing firms, HR firms, family advisors and personal coaches may also be appropriate.
Whatever advice is needed, an exit plan coordinates and communicates with these important professional advisors when their advice in needed.